In reality, E-Biofuels bought finished, low-grade biodiesel through middlemen and portrayed the purchases as invoices for the raw materials needed to produce biodiesel from scratch. The company would then sell the fuel as high-grade biodiesel “for as high as double the price it paid for it,” the SEC said.

Imperial executives allegedly allowed the scheme to continue after discovering E-Biofuels’ ruse, and also posed to investors that E-Biofuels was producing its own environmentally friendly biodiesel.

Imperial’s annual revenue increased to more than $100 million from $1 million and its stock price soared, the SEC said.

The SEC alleged the scheme raked in profits of more than $50 million. E-Biofuels also received $35 million in tax credits. The company’s stock price plummeted after the scheme fell apart, resulting in a market loss of about $60 million, the SEC said.

The SEC complaint filed in federal court charges Imperial Petroleum, Imperial’s Chief Executive Jeffrey Wilson, and three former owners of E-Biofuels — Craig and Chad Ducey, who are brothers, and Brian Carmichael, the SEC said.

Three New Jersey-based companies and their operators were also charged for acting as middlemen and allegedly providing false documents to deceive regulators and investors. They are Caravan Trading LLC, Cima Green LLC, and CIMA Energy Group, and operators Joseph Furando and Evelyn Pattison.

Separately, the U.S. Attorney’s Office for the Southern District of Indiana announced criminal charges against the five people the SEC identified in a press release plus Chris Ducey, who also knew E-Biofuels was not producing biofuels on its own, federal prosecutors said.

Carmichael, charged with one count of conspiracy, has filed a petition indicating he is willing to plead guilty, federal prosecutors said. He faces up to five years in federal prison. The other five face up to 20 years in prison as well as fines. The defendants were scheduled to appear before a magistrate on Wednesday, the federal prosecutors said. Charges include allegations of conspiracy, tax fraud, securities fraud, and money laundering.

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